The Monitor's View

For US economy, investments first, jobs to come later

Obama's ideas to create jobs should be based on proven success, and no country is a better model than Germany. With recent reforms, it has made productive investments in a job-creating, flexible export machine.

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Between Democrats and Republicans there is no lack of ideas on how to create jobs. But an abundance of ideas on paper is no match for facts on the ground – or proven models for practical job growth that can be replicated around the United States.

Where might such models exist in the world?

Some in Washington look to China, whose economy just keeps on booming. But its success relies too much on the Communist Party’s iron-fisted controls, such as jailing protesting workers or violating market fundamentals by manipulating its currency rate.

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Canada? It wisely avoided the housing boom and bust in the US but it enjoys a mineral-rich resource economy – one its neighbor doesn’t have.

No, the best model may be Germany. Long the largest and the strongest economy in Europe, it channels its savings into wise investments in the people and technology that fuel the successful export of manufactured goods.

Compared with the US, Germany has not put vast resources into buying homes, creating a giant financial-services industry, or stimulating consumer demand.

More than half of German households rent while home prices have been level for a decade. Much of business is privately owned, not relying on Wall Street-style public ownership and its fickle, short-term perspective. Germans are modest consumers, living within their means.

All that, and recent reforms of the welfare system and labor rules, have done wonders to lower the unemployment rate. In the past decade, even through the 2008-09 economic slowdown, the jobless rate has fallen from double digits down to 7 percent. It is forecast to drop further in 2012.

Germany’s culture of long-term, patient investment feeds the efficient entrepreneurs who make the precision-engineered goods at the heart of the country’s competitive export machine. And a close worker-employer relationship allows people to keep their jobs during tough times by making temporary sacrifices in compensation.

To be sure, Germany is coping with an aging population of 82 million people and it must import workers. The economy is vulnerable if European or world markets suffer a recession. It needs to create a stronger domestic-demand economy.

Still, if President Obama and Republicans in Congress want to find a consensus on real job creation, they should focus on altering the tax code and other policy to spur investment in manufacturing exports.

In Germany, exports account for nearly half of the economy; In the US, it’s only 13 percent.

So instead of talking of “job creation,” let Washington rally around “investment in manufacturing.” That was once America’s strength before it was lured into putting its savings and its best and brightest into the real estate industry, the New York canyons of high finance, and high-flying corporate takeovers.

Much of the nearly $1 trillion US stimulus package in 2009 went toward keeping the jobs of state and local government workers. It didn’t work to rev up a globally competitive economy.

Now it’s time to look to the German industrial powerhouse, which a recent Monitor article described as relying on “elbow grease, niche market savvy, and, ... ‘doing our homework.’ ” What has it done right that the US can do?

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